(NSW) Mandatory Code of Conduct for Commercial Leasing - forced to reduce rent?

Discussion in 'Commercial Property' started by thesuperman, 16th Apr, 2020.

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  1. thesuperman

    thesuperman Well-Known Member

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    Do you have an agent managing the property or are self managing? Have you told them full rent is still payable until a suitable outcome has been agreed on?

    Which government body did you apply for mediation? I wonder how long mediation will take but guess it will take quite a long time. Please keep us updated on the outcome.
     
  2. SF retiree

    SF retiree Member

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  3. SF retiree

    SF retiree Member

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    We are self managing. We downloaded every document put out by the Cwth government And recent NSW legislation. mediation is through the Office of Small Business Commissioner NSW. Our tenant initially requested 50% reduction based on BCP which we refused then they asked for 30% based on requirement for Jobkeeper. They paid full rent April and 70% May BUT they are now claiming 85% reduction which they imply will go to 100% as they are applying only the strict definition of turnover. Basically they are saying they have no Turnover as the subsidies they are receiving are not classed as turnover for GST Purposes - ATO not treating them as turnover. They are now demanding that rent paid will be credited towards future rent! Basically their income is as good or better than a year ago But saying none of it can be counted! We are arguing that the Code and legislation require to demonstrate economic impact - the impact on them is positive! Unfortunately, my solicitor and accountant understand less than I do and most people don’t realise how much some businesses can receive through all these subsidies and bonuses.
    until I started to put the figures down I really didn’t think they would be making so much out of it.
    Other than Early childhood education relief (BCP) and Jobkeeper other benefits they may get are: less wages; less expenses as fewer children attending; ? Reduced PAYG tax as I don’t think these subsidies are subject to tax; cash flow boost NSW; trainee 50% wage subsidy; accelerated depreciation. Tenant has involved their solicitor I may need to find one that really understands what this is all about esp if mediation fails and have to go to tribunal or court .
    These are 2 pretty comprehensive documents - a lot to wade through. The second one includes the Code.
    https://www.claytonutz.com/knowledg...lated-rent-relief-with-release-of-regulations


    https://corrs.com.au/site-uploads/i...or-commercial-tenancies_200415_063628.pdf.pdf

    Good Luck
     
  4. Pawer

    Pawer Member

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    this is correct, you cant add this into turnover, Casflow boost, jobkeeper payment, any government help are not part of turnover.

    My advice, why not using quarterly bas june 2019 vs 2020 as comparsion, and then reduce the rent according to percentage loss ? This is the easiest thing to do.

    This is what i go thru with my owner, april may june 2020 I paid half rent , and wait until i lodge june bas 2020 , we will compare with june bas 2019 and see how much percentage loss. Let say 40% - then we work out how much rent waive and defer according to SME code.

    Only sales recorded with GST are calculated into bas reporting system ( excluded money from jobkeeper, CFboost , etc ).
     
  5. SF retiree

    SF retiree Member

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    It is not that simple! Everyone is talking as if “turnover “ is all that has to be considered BUT the NSW legislation and Mandatory Code of Conduct state that renegotiation of rent has to have regard to the economic impacts of COVID-19 and the leasing principles. Economic impact involves revenue, expenses and Profit! Not just Turnover as defined for JOBKEEPER. It says REVENUE! By comparing last years BAS with this year’s is cheating the landlord in my case!

    My tenant is claiming the relief package (BCP) and JOBKEEPER are not “turnover” so basically “Turnover” is $0!!! If my tenant was to pay FULL rent for this June QTR they will make MORE PROFIT than 2019 June QTR! They are benefiting from COVIFD-19 like you may be!? So ANY reduction in rent is a loss to us but even MORE profit to tenant.

    So by using BAS or turnover the landlord is being cheated! To me this is not morally fair at this time!

    To explain: If you let my tenant’s JUNE 2019 QTR income (Fees and CCS) = $X their wages were 65%$X and they had 35%$X left to pay rent, other expenses and profit.

    June 2020 QTR income is 50%$X from BCP and 46% $X from Jobkeeper. their total income = 96%$ X. With reduced attendees their wages is only 50%$X so they have 46%$X to pay rent, other expenses and profit!

    So after paying wages, they are better off by 11%$X.

    Their other expenses will be less, as there are fewer expenses with fewer attendees. On top of this the PAYG tax they take out of their staff wages, they are pocketing through CASH Flow boost! Not to mention trainee support and accelerated depreciation!! I suggest you look at your total income , expenses and profit maybe you are being unfair to your landlord!
     
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  6. thesuperman

    thesuperman Well-Known Member

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    What is "trainee support"? Do you have a link to it and what financial benefits a tenant gets from it? Thanks
     
  7. SF retiree

    SF retiree Member

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    Supporting apprentices and trainees | business.gov.au

    50% wage subsidy 01/01/20 - 30/09/20 I think up to $7000 per QTR must have <20 employees.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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  9. SF retiree

    SF retiree Member

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    Thanks for the link unfortunately doesn’t help much. No one is really examining the code and legislation from child care industry point of view. It is the only industry bailed out by the cwth government.
     
  10. CK_Invest

    CK_Invest Well-Known Member

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    tenant is primary cash business (think: coffee shop / takeaway) - they could claim absolutely anything for jobkeeper....
     
  11. Property Guts

    Property Guts Well-Known Member

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    or nothing, i would think
    Jobkeeper is based on BAS forms submitted to ATO
     
  12. CK_Invest

    CK_Invest Well-Known Member

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    Tenant refuses to provide financials but has an accountant letter stating the revenues were reduced by x% compared to last year without any specifics or mentioning whether the $10k they received was included .

    Funny thing is, I walk by several times in the day and business looks quite decent, in fact foot traffic looks same pre covid

    Whilst I sympathize with the current situation, unfortunately some tenants seem to be taking advantage of this situation to get freebies.
     
  13. CK_Invest

    CK_Invest Well-Known Member

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    so.... lockdowns happen again

    tenant has decided not to pay rent whatsoever 'within their rights' as they claim due to lockdown despite renewing our lease last year (no increase applied) with more than half the year with a rental discount

    anyone else face something similar with commercial property? the code of conduct released last year doesnt apply anymore right? lockdown isn't the landlords faults I don't get why the government indirectly makes us foot the bill...
     
  14. eyespy1

    eyespy1 Well-Known Member

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    Revenue Nsw apparently will provide land tax refund for amount of rent reduction you provide to the tenant.However it’s not obvious how they calculate this amount. Last year, I provided $16000 in rent reduction for my tenant but I only got a land tax refund of $4000. So not sure how they calculate it.
    My tenant hasn’t paid their July rent either….I guess they’ll be asking for rental reduction again.
    Am a bit annoyed that the businesses can claim numerous types of grants to help them with this lockdown but there’s not much there to help us landlords. Am I missing anything ?
     
  15. CK_Invest

    CK_Invest Well-Known Member

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    100% agree, there are several grants available which should be used towards also paying rent, along with paying wages etc...

    I don't believe the land tax deduction is available anymore after Q1 2021 but I might be mistaken.
     
  16. Scott No Mates

    Scott No Mates Well-Known Member

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    I have just recieved an email from another commercial agent on the topic of rent relief and have provided an extract below.

    "
    Eligibility criteria
    1.1 To be eligible for a grant under the Commercial Landlord Hardship Fund applicants must:
    (a) be a landowner or trustee with total taxable land holdings of less than $5 million (as at 31 December 2020, under the Land Tax Management Act 1956), including part holdings but excluding the value of a principal place of residence;
    (b) have not claimed land tax relief for the relevant property for rent reductions between 1 July 2021 and 31 December 2021;
    (c) have gross rental income as their primary source of income (gross rental income being more than 50% of total assessable income) for the 2019-20 financial year;
    (d) be a landowner of the property for which an application is made;
    (e) be the landowner of a New South Wales property subject to the Retail and Other Commercial Leases (COVID-19) Regulation 2021;
    (f) be a landlord with a current lease agreement that provides rent relief to the tenant(s) from 13 July 2021 that will not be claimed as 2021 land tax relief; and
    (g) attest that providing rent relief to the tenant(s) may cause financial hardship

    Disappointingly, given that this CCOC is mandatory, being ineligible for support as a landlord does not limit liability when it comes to providing assistance for tenants, making this, the second round of unassisted rent relief, a very bitter pill to swallow."

    It is pretty limited.
     
  17. allanh

    allanh Well-Known Member

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    Couldn't you take them to court?
     
  18. Shady

    Shady Well-Known Member

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    I realise this a couple of moth sold but
    Yes, it does. It expired back in March this year but the State Government 'snuck' it back in at 6pm of a Friday night a month or so ago.